Macroeconomic terms

Topics: Supply and demand, Inflation, Aggregate demand Pages: 41 (4414 words) Published: September 22, 2014
Macroeconomic Terms

Describe the following terms in your words.

TermDefinition
Gross Domestic Product (GDP)
The value of all of the goods and services of a nation in a year. Real GDPThe value of all of the goods and services based on inflation of a nation in a year.

Nominal GDPMarket value of all goods and services of a nation in a year, not based on inflation.

Unemployment rateThe number of all of the unemployed by the number of people in the workforce.

Inflation rateThe rate that the prices of goods and services are rising.

Fiscal PolicyThe governmental policies which adjust spending.

Monetary PolicyThe governmental policies that help to control the economy. This is done by adjusting the money supply either up or down. Aggregate Demand (AD) CurveA downsloping curve that shows the relationship between the price of things and the demand for those things.

The relationship between the MPC and the MPS indicates that the entire increase in household disposable income

is distributed between consumption and saving.

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Planned real investment is determined by the

rate of interest

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What won't cause the planned investment function to shift rightward?

A decrease in the interest rate

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An increase in the interest rate causes

a decrease in the amount of real planned investment

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In the Keynesian model equilibrium national income

equals planned consumption, investment, government, and net export expenditures

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If real GDP falls below total planned expenditures the economy will see

production and employment increases

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When government spending and net exports are added into the Keynesian model

the aggregate expenditures function shifts

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What is true concerning the foreign sector in the simple Keynesian model?

Net exports are autonomous

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The greater the value of the marginal propensity to consume

the greater the value of the multiplier

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The greater the value of the marginal propensity to save

the smaller the value of the multiplier

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Nominal GDP is dependent on

the price level and output

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If the price level rises the multiplier effect on real GDP will be

weaker than if the price level were constant

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What is true when considering an economy with an upward sloping SRAS curve?

The multiplier has more impact when the economy is experiencing a recessionary gap compared to an inflationary gap

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The multiplier is weakened in inflationary gaps because of

rapid price level increases

What is true of the multiplier in the Keynesian model when there is an increase in autonomous expenditures?

Expenditures increase by the same proportion during each round of spending

In this situation in which there is an increase in autonomous expenditures, in each successive round that the multiplier is applied

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The long-run aggregate supply curve shifts outward when

There is economic growth

The long-run aggregate supply curve is determined by

The full employment level of real output

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The long-run aggregate supply curve shifts outward when

There is economic growth

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The long-run aggregate supply curve

Is vertical because changes in the price level have no effect on real output

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Year to year rightward shifts in long-run aggregate supply leads to

A long-run trend path for real GDP

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Total expenditures for domestically produced goods and services consist of

Consumer spending, business spending, government spending, and net foreign spending.

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What is not a component of total expenditures?...
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